President William Ruto’s administration has suffered a major blow after the Supreme Court rejected its plea for a stay on the nullification of the Finance Act 2023.
A decision rendered on Friday, August,2,2024 by Apex court has placed the country’s economic stability in a precarious position, further deepening the fiscal uncertainty that has gripped Kenya following recent legislative upheavals.
The Supreme Court declined to suspend the Court of Appeal decision that upheld the High Court decision that declared the Finance Act 2023 unconstitutional crippling the government operations.
This ruling comes at a particularly inopportune moment for Kenya, which is already grappling with the withdrawal of the Finance Bill 2024.
With the Finance Act 2023 nullified, and no clear alternative revenue plan in place, the government faces the daunting task of managing its finances amidst a substantial Ksh 510 billion gap in the national budget for the current fiscal year.
The Supreme Court’s decision not only rejected the Treasury’s request but also certified the matter as urgent, scheduling it for a hearing during the August court recess.
The court directed the applicants led by the Attorney General, Treasury, and KRA to serve the Busia senator and other respondents with their application by the close of business on Monday, August 5, 2024.
Omtatah, LSK, and other respondents were granted 5 days to file their written submissions and responses.
“The application shall be disposed of through written submissions and a ruling on the motion shall be delivered on notice,” the Supreme Court ordered.
The decision by the court comes after National Treasury through its PS Chris Kiptoo has filed an urgent appeal seeking to temporarily halt the implementation of the Court of Appeal’s decision declaring the Finance Act 2023 unconstitutional.
In its appeal, the Treasury argues that it is not logistically or practically feasible to immediately reconfigure state agencies and departments to revert to the Finance Act 2022 due to system and software requirements.
Treasury PS argues that implementing the 2022 tax regime requires significant updates to platforms and revenue collection systems, as well as detailed engagements with software providers, all of which necessitate time and resources.
“The invalidity of the Finance Act 2023 creates uncertainty in revenue collection and disrupts the government’s ability to function efficiently,” the National Treasury said in the appeal.
Additionally, the Treasury contends that the Court of Appeal erred by overturning its own precedents, undermining judicial consistency.
They argue that relying on the Finance Act 2022 for a subsequent fiscal year is legally invalid and undermines principles of governance and the rule of law.
This ruling, they say, creates a constitutional crisis by obstructing the government’s lawful revenue collection and fund allocation.
The Treasury warns that if the stay is not granted, the government risks a shutdown due to the lack of a current legal framework for revenue collection.
The absence of a legitimising Finance Act may lead to the cessation of essential public services, causing widespread dysfunction.
It further notes that without a stay, the government faces potential legal challenges, including claims for contempt of court due to the disruption in statutory financial operations.
